SHANGHAI - Yum China Holdings, Inc. (NYSE: NYSE:YUMC), a leading restaurant company in China, reported its first-quarter earnings, surpassing earnings per share (EPS) expectations but falling short on revenue estimates.
The company reported a Q1 EPS of $0.71, which was $0.06 higher than the analyst consensus of $0.65. However, revenue for the quarter was $2.96 billion, missing the consensus estimate of $3.05 billion. The stock was down 0.7% in aftermarket trading Monday.
The company's CEO, Joey Wat, expressed satisfaction with the solid sales growth during the quarter, attributing it to the total revenues hitting an all-time high. Wat highlighted the core operating profit's modest growth from the previous year's high base and a double-digit EPS increase when excluding foreign currency impacts. Yum China's expansion initiatives continued as the company's total store count reached a milestone of 15,000 stores, with a record 378 net new stores opened in the first quarter.
Despite the revenue shortfall, Yum China's system sales grew by 6% year-over-year (YoY), excluding foreign exchange (F/X) impacts, mainly due to an 8% net new unit contribution. The company's operating profit reached $374 million, with core operating profit growing to $396 million. Operating profit as a percentage of total revenues was 12.6%, with savings in general and administrative expenses partially offsetting the lower restaurant margin, which stood at 17.6% for the quarter.
Yum China's digital sales reached $2.5 billion, with digital ordering accounting for approximately 89% of total company sales. The total membership of KFC and Pizza Hut reached 485 million, with member sales accounting for approximately 65% of KFC and Pizza Hut's system sales in aggregate.
The company's outlook for the 2024 fiscal year remains unchanged, with plans to open approximately 1,500 to 1,700 net new stores, make capital expenditures in the range of approximately $700 million to $850 million, and return a company record-setting $1.5 billion to shareholders through quarterly cash dividends and share repurchases.
Wat emphasized the company's focus on understanding and capturing the evolving needs of consumers and expressed confidence in seizing China's vast opportunities. Yum China aims to expand its addressable market through a multifaceted approach, including flexible store formats, strategic franchising, and a range of exciting products across price points.
Yum China's commitment to growth and shareholder returns is evident in its record quarterly cash return to shareholders of $745 million through share repurchases and cash dividends.
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